Cryptocurrency leader advocates for defined regulations on Bitcoin's domestic position in South Africa
In the world of cryptocurrencies, South Africa is taking a significant step towards regulatory clarity. Paul Harker, Global Head of Legal and Corporate Strategy at Luno, has called for the National Treasury to classify bitcoin as an onshore asset for local exchanges. This move could have profound implications for institutional investment within the country's financial framework.
Currently, cryptocurrencies are not explicitly classified as either onshore or offshore assets by South African regulators, creating uncertainty and limiting institutional participation in crypto markets. This ambiguity hinders the development of regulated cryptocurrency investment products and discourages institutional funds from flowing into digital asset products.
If bitcoin is reclassified as an onshore asset, it would provide clarity and regulatory certainty for asset managers and institutional investors. This would enable them to offer and invest in cryptocurrency products such as Bitcoin ETFs without being constrained by exchange control restrictions typically applied to offshore assets.
One of the key benefits of this reclassification would be the ability for asset managers to introduce crypto-related financial products like ETFs that track Bitcoin’s value, facilitating broader institutional adoption. It would also allow retirement funds and pension funds, which are currently prohibited from investing in cryptocurrencies under Regulation 28, to consider crypto as part of their portfolios if regulatory frameworks evolve with the new classification.
Furthermore, the onshore classification would increase tax revenue for the government through improved capital gains and profits tax collection on digital asset transactions. Estimates suggest an additional R540 million (about $30 million) in taxes over five years from just a 1% institutional fund allocation into crypto products.
Moreover, this move would improve regulatory oversight, as onshore classification would grant authorities better visibility into crypto transactions and enable automated, tax-compliant reporting systems. This would help South Africa remain competitive globally, where major asset managers like BlackRock have successfully launched Bitcoin ETFs attracting huge institutional inflows, demonstrating growing acceptance of crypto as a strategic asset class.
However, even with onshore classification, other regulatory barriers remain, such as the current prohibition on retirement funds investing in crypto and the Johannesburg Stock Exchange’s lack of finalized listing requirements for crypto ETFs. For maximum impact, classification must be accompanied by regulatory reforms addressing these constraints.
In summary, classifying Bitcoin as an onshore asset would reduce regulatory uncertainty, unlock substantial institutional capital inflows, increase tax revenues, and better integrate cryptocurrencies into South Africa’s financial system, positioning the country as a competitive and innovative player in the evolving digital asset economy.
It's important to note that onshore assets are officially held by residents in the country they reside in and are regulated by the laws of the specific country. Conversely, offshore assets are held and managed by institutions outside the country and are often unregulated. The Organization for Economic Cooperation and Development (OECD) states that offshore assets in the world only constitute less than 2% of all assets invested globally.
Harker, who has been involved in regulatory conversations with the South African Reserve Bank in the last few years, claims that these discussions have helped shape the recently enacted crypto regulations in the country. In early 2025, the Financial Sector Conduct Authority (FSCA) responsible for issuing licenses approved the activities of 248 crypto firms in South Africa.
Harker believes the South African government is missing out on opportunities to earn more revenue in taxes from increased investment in bitcoin. He stated that there is 'significant capital' on the sidelines waiting to be pumped into bitcoin, with a portion of this capital finding its way to government coffers via taxes.
In conclusion, the reclassification of bitcoin as an onshore asset could be a game-changer for institutional investment in South Africa. It would provide clarity, unlock liquidity, increase tax revenues, and improve regulatory oversight, positioning the country as a competitive player in the evolving digital asset economy.
- If bitcoin is reclassified as an onshore asset in South Africa, it could provide clarity and regulatory certainty for asset managers and institutional investors.
- The onshore classification of digital assets like bitcoin could enable retirement funds and pension funds, currently prohibited from investing in cryptocurrencies under Regulation 28, to consider crypto as part of their portfolios if regulatory frameworks evolve.
- The improved regulatory oversight that comes with onshore classification would grant authorities better visibility into crypto transactions and enable automated, tax-compliant reporting systems.
- The reclassification of bitcoin as an onshore asset could help South Africa remain competitive globally, especially given major asset managers like BlackRock have successfully launched Bitcoin ETFs, attracting huge institutional inflows.
